Macrs depreciation schedule-net present value of project

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Reference no: EM131987779

The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $20. The unit cost of the giftware is $10.

Year Unit Sales 1 32,000 2 40,000 3 14,000 4 8,000 Thereafter 0. It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year 0) investment in working capital of .20 × 32,000 × $20 = $128,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $210,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm’s tax rate is 35%. What is the net present value of the project? The discount rate is 10%. Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

Reference no: EM131987779

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